IMF Staff Completes 2015 Article IV Mission to Lesotho
MASERU, Lesotho, September 2, 2015/African Press Organization (APO)/ -- An IMF Article IV mission visited Maseru from August 20 – September 2.The mission met with the Honorable Ministers of Finance, Development Planning, Public Service, Education and Training, and Health, Honorable Chairpersons of several Parliamentary Committees, the Governor of the Central Bank of Lesotho (CBL), the Acting Vice-Chancellor of the National University of Lesotho (NUL), other Government and CBL officials, NUL faculty and students, and representatives of the financial sector, private sector, the Council of Church Leaders, civil society, and international development partners. At the end of the mission Mr. Dunn, the mission chief, issued the following statement:
“For several years, Lesotho achieved solid economic growth with only moderate inflation. Real Gross Domestic Product (GDP) grew on-average by about 4½ percent a year over the past 5 years. However, growth needs to be more inclusive. Poverty and unemployment have been major challenges over the past decade, especially in rural areas. Inflation averaged just below 5 percent a year during this period, largely tracking inflation in neighboring South Africa. Most recently, the sharp drop in international fuel prices led inflation to fall below 3 percent—the lowest rate since 2010.
“Looking ahead, Lesotho faces a challenging economic outlook, and growth for 2015 is expected to slow to about 2½ percent. The economy depends heavily on Government spending, financed largely by revenues from the Southern African Customs Union (SACU). But SACU revenues, which are highly volatile, have begun to slip and are expected to fall sharply in the next fiscal year, 2016/17 (to just over 15 percent of GDP, compared with almost 30 percent in 2014/15). In line with the mission's recommendations, to maintain economic stability, the Government intends to initiate a fiscal adjustment of several percentage points of GDP over the next three years, mainly by reducing expenditures and increasing efficiency. In particular, the Government will review its wage bill, which has grown to 23 percent of GDP—the highest relative to GDP in sub-Saharan Africa—with a view toward finding savings, while improving service delivery. Strengthening budget controls and management of the public service will be critical to achieve a successful fiscal adjustment.
“There is an urgent need to enable the private sector to become the engine for growth and job creation in Lesotho. The IMF mission was encouraged to learn that there are a number of productive initiatives that can be taken in the near term to boost employment. For example, the Lesotho National Development Corporation (LNDC) is committed to leasing factory shells on a commercial basis, which will open space to companies with the highest potential for creating new jobs. In line with the Financial Sector Development Strategy (FSDS), the authorities are also addressing obstacles to credit, such as the recent start of a credit reference bureau, which will help to reduce spreads between deposit and lending interest rates. In addition, the mission encourages the authorities to kick start implementation of the 2012 National Strategic Development Plan.
“The IMF mission wishes to express its gratitude to the Basotho authorities for the constructive discussions and warm hospitality during its visit to Lesotho. The mission will prepare a report of the Article IV consultation which will be discussed by the IMF's Executive Board in mid-November.”